Monday, November 12, 2012
Options Trade - Intel (INTC)
I'm reporting an options trade from last Thursday. I sold another INTC put, this time longer dated.
I sold a July 20 '13 $21 PUT @ 1.96. If assigned I would be buying an additional 100 shares at a cost of $19.04/share. That would be a 4.7% yield if INTC doesn't even raise its dividend. This would also reduce my cost basis further.
I'm expecting to get put 100 shares this week at a cost of $22.56/share after premiums. I will continue to add to INTC by selling puts as I like the company long-term.
I've updated this trade on my options tab.
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I finally completed the paperwork to add options trading to one of my accounts. I'm sending it in this week. Just wondering if you sell naked puts or do you keep the cash in your brokerage account incase you get put the shares? What happens if you get put the shares but don't have any money in your account; are you given time to transfer the funds?
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Hi ADY. Those are good questions. So I sell naked puts with E*Trade but there are margin maintenance requirements. As long as I meet the margin requirements I won't have to pay any type of fees or interest on that account for using margin.
DeleteFor instance, I currently have 10k cash in my options account and I have an available balance of $1300. This means my current margin requirement is $8700. You can see how many options I have open on my options tab. I would need a lot more money in the account if all the options were put to me. The margin requirement changes daily as the price of the options fluctuate and the options are deemed more or less risky.
All options expire on a specific date. My INTC put expires on a non-trading day , 11/17, so will get assigned on the following trading day which is 11/19. I will need to transfer at current margin requirements an additional approximately $1100 in order to get assigned the INTC shares and still have enough money to meet the margin requirements.
There is obviously enough money in the account to cover the INTC shares being put to me, but it would take my margin maintenance requirement negative meaning I'd be charged interest on the difference.
The margin maintenance rule for naked puts is:
Proceeds of the sale plus 20% of the underlying value less out of the money amount OR proceeds of sale plus 10% of strike price, whichever is greater. You always have enough for stocks to be put to you because you are trading in a marginable account.
I hope this helps and I look forward to seeing your options trades!
I would love to get into options (especially selling some put options) but my problem is the fee associated with them. I don't have enough money to be selling more than one contract at a time (100 shares) and the fee eats a large percent of the premiums i would be collecting. What brokerage do you use? And what do they charge to sell one put contract?
ReplyDeleteThanks for the info. Much appreciated.
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